Business Finance - Chapter 3 Quiz

The DuPont identity can be used to help a financial manager determine the: 1. degree of financial leverage used by a firm. 2. operating efficiency of a firm. 3. utilization rate of a firm's assets. 4. rate of return on a firm's assets.

1, 2, 3, and 4

Lopez Technology has accounts receivable of $35,680, total assets of $538,500, cost of goods sold of $325,400, and a capital intensity ratio of .90. What is the accounts receivable turnover rate?

16.77

Northside City Mart has a market-to-book ratio of 2.8, net income of $323,500, a book value per share of $31.25, and 7,500 shares of stock outstanding. What is the price-earnings ratio?

2.03

A firm has sales of $811,000 for the year. The profit margin is 5.1 percent and the retention ratio is 56 percent. What is the common-size percentage for the dividends paid?

2.24%

Fresh Foods has sales of $213,600, total assets of $198,700, a debt-equity ratio of 1.43, and a profit margin of 4.8 percent. What is the equity multiplier?

2.43

A common-size balance sheet helps financial managers determine:

if changes are occurring in a firm's mix of assets.

Mercier United has net income of $128,470. There are currently 32.67 days' sales in receivables. Total assets are $1,419,415, total receivables are $122,306, and the debt-equity ratio is .40. What is the return on equity?

12.67%

Computer Geeks has sales of $618,900, a profit margin of 13.2 percent, a total asset turnover rate of 1.54, and an equity multiplier of 1.06. What is the return on equity?

21.55%

Khalid Warehouse has total assets of $485,390, net fixed assets of $250,000, current liabilities of $23,456, and long-term liabilities of $148,000. What is the total debt ratio?

.35

A firm has adopted a policy whereby it will not seek any additional external financing. Given this, what is the maximum growth rate for the firm if it has net income of $32,600, total equity of $294,000, total assets of $503,000, and a 25 percent dividend payout ratio?

5.11%

McHenry Sales has sales of $938,300, cost of goods sold of $688,050, and inventory of $98,880. How long, on average, does it take the firm to sell its inventory?

52.45 days

SRC, Incorporated, sells its inventory in an average of 52 days and collects its receivables in 3.6 days, on average. What is the inventory turnover rate? Assume a 365-day year.

7.02

The sustainable growth rate is defined as the maximum rate at which a firm can grow given which of the following conditions?

No new external equity and a constant debt-equity ratio

Ratio analysis cannot be taken at face value for all of the following except which reason?

While GAAP is consistent across the globe, multiple currencies may be considered.

The sustainable growth rate is based on the premise that:

the debt-equity ratio will be held constant.

Common-size financial statements present all balance sheet account values as a percentage of:

total assets

Quincy Real Estate pays out a fixed percentage of its net income to its shareholders in the form of annual dividends. Given this, the percentage shown on a common-size income statement for the dividend account will:

vary in direct relation to the net profit percentage

Builder's Outlet just hired a new chief financial officer. To get a feel for the company, she wants to compare the firm's sales and costs over the past three years to determine if any trends are present and also determine where the firm might need to make changes. Which one of the following statements will best suit her purposes?

common-size income statement

Financial statement analysis:

provides useful information that can serve as a basis for forecasting future performance.

Galway Plumbing Supply has a return on equity of 19.3 percent, a profit margin of 10.1 percent, and total equity of $645,685. What is the net income?

$124,617.21